nifty: Dalal Street Week: Nifty will likely resume up move; key at 16,000

These five sessions were pretty consistent. While the headline index saw some corrective moves and took support at crucial levels, the session ended with a minor reduction. Trading range also narrowed slightly, compared with 614 points the week prior. NiftyMoved in a 390-point range.

The index managed to keep its head above critical levels but closed with a net loss (171 points) (-1.06%) on an weekly basis.

Technically, Nifty maintained the 16000-level. This is the higher edge of the 15,700-16,000 area that Nifty had violated while it was going down. This zone was protected by the index’s recent corrective move. The Nifty also maintained its head above 100-WMA levels. The Nifty’s ability to maintain a level above 15,700-16,000 was important and will be so in the coming weeks. Nifty’s ability to maintain a head above 16,000 is crucial. Any dip below this point could result in further weakness. This seems less likely at the moment.

Volatility declined slightly as well. India VIX fell by 4.34% to 17.60 per week. The week ahead is expected to be buoyant. Potential resistance points would be the levels of 16,180 or 16,495 The levels of 15,900, 15,710 and 16,495 will act as potential resistance points. Expect a wider trading range than usual.

The weekly RSI stands at 44.78. It is neutral and shows no divergence from the price. The weekly MACD reading is negative and below the signal level. The Histogram is showing a narrower slope that suggests a positive crossover in coming weeks.

The candle was lit by a Harami bearish. Harami candles form when a candle is completely covered by another candle. A Spinning Top is also found on the candle. This is due to a small body. It often indicates periods of indecisive or consolidation. The pattern analysis of the weekly charts shows that Nifty has managed its head above 16000 level, which is the upper edge to the support zone the Nifty strayed from on its descent. This is a positive sign that the index has managed to climb back above 16000 levels and has maintained its position above it.

We will see stability in the markets. There is a greater chance that the markets will resume their upward movement after some consolidation as was seen in the week before. There has been no significant change to the sectoral arrangement since the last week.

Financials might try to perform better. Economy-facing stocks such as autos and other sectors could do well with some defensive ones. As long as one does not short the markets, it is advisable to keep their heads above the 16,000 level. Markets above this level require that all dips be used to make quality purchases at lower levels.

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (Nifty 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs analysis shows no significant change to the sectoral setup as was the case the week before. Nifty FMCG, Nifty Consumer and Nifty Auto are the most defensive groups. They will likely outperform the broader market. The leading is also Bank Nifty. Nifty Services, realty and financial services sector indexes are all within the improving quadrant. They are seen maintaining or further improving their relative momentum with the Nifty500 index.

Nifty Pharma is located in the weakening quadrant. Nifty PSE, Infrastructure and Nifty Energy are seen turning around by increasing their momentum. Nifty Pharma may also show stock-specific performance going forward. Nifty PSE (Infrastructure), and Nifty Energy all fall within the weakening quadrant. Nifty IT, PSU Bank and Nifty Media all fall within the lagging quadrant. However, they are seen trying consolidate their positions and may attempt to sustain this trend.

Nifty Metals and Commodities indices also languish in the lagging quarter.